Vedanta Resources shares led FT-SE 100 losses with a 3.5%, or 84p fall to £22.73, after Bloomberg reported that the mining group is in talks to buy assets or an equity stake in Cairn Energy, a British oil and gas exploration company.
The talks are advanced, and a deal may be announced later this month, the newswire reported.
Vedanta controlled by Indian billionaire Anil Agarwal, said in 2008 it will spend $20bn in India on mines and power plants over four years.
Cairn Energy, based in Edinburgh, has a market value of £6.22bn and is exploring for oil off Greenland. Its biggest asset is a 62% stake in Cairn India, which operates the country's largest onshore oil field.
Cairn Energy shares rose 0.7%, or 3.5p, to 448p.
